Consolidation before the Fed but Positioning Shows Markets Bearish on EUR

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Consolidation before the Fed but Positioning Shows Markets Bearish on EUR

The euro bounced off of its lows for the day despite S&P downgrading the credit rating of Italy. Today's price action may be seen as a consolidation with markets awaiting results from the Fed's meeting. Market players may be looking for further EUR declines as speculators have built their largest position against the EUR since early August.

The majors have been unable to find direction today as many participants are eyeing tomorrow's FOMC statement. Expectations are for some form of “Operation Twist” with the likeliest path being the Fed purchasing US Treasuries at the long end of the curve using the proceeds from the maturing MBS the Fed holds on its balance sheet. This could be a positive for the USD if the Fed goes this route versus an expansion of the Fed's balance sheet. This stands in contrast to the ECB, BOJ and BOE who are likely to increase their balance sheets in the near term.

The EUR was sold during the Asian trading session after S&P announced it was downgrading the sovereign debt rating of Italy, effectively beating Moody's to the punch. But the selling pressure was not enough to send the EUR/USD below yesterday's low which was made at the opening of the North American session. The pair found resistance at last Friday's low of 1.3750, essentially closing the opening gap from the weekend though a close above this level on the daily chart would be needed to test the next resistance of 1.3930. The euro zone debt saga continues to drag on with the Troika talks ongoing. Things may get better before they get worse with rumors flying of a Greek exit from the EMU. The downside beckons at 1.3500 though move lower and a failure to break last week's support would set up a double bottom, a bullish technical pattern.

According to the latest CFTC Commitment of Traders report speculators seem well positioned to test the 1.3500 level as EUR shorts have grown to their largest positioning since early August. Any consolidation could hurt weak USD longs but rising open interest suggests speculators favor further moves lower in the EUR/USD.

hmmm. Spain have much better economic datas than before.
It is recovering.
There are also new rescue plans in EU etc.
On the other hand USA wants to stamp more USDs (papers)
Eurusd is oversold shorttermly and is bearish just longtermly.
so ...

Yes, the rift now went to the eurozone as the worst economy. But the us dollar is still struggling with the euro recently.

the outcome of the eurozone crises will determine the market direction of most pairs, in they succeed in solving the problem then we will see stronger euro ,if they fail then we will see weaker euro especially if good news from the US maintain tempo

No matter what happens in the market, i believe that the speech of the FED chairman must not be under extimated, i will say that the EUR on its own can not even dare to challenge that eve with the vast politics.

when doing forex trading with the help of consolidation EUR bearish contained in my own point is not so much to understand. especially during the currency of my study I often fail to predict the news so I better leave it. other than that if there is an easier then I would use it that much easier.

either the fed releases its policy in accordance with the technical in the eur/usd or not i will wait for the dust to settle so that it will become easy for me to do business in the forex market because the technicals is always the king.

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